California employers manage four distinct payroll taxes each pay period: Unemployment Insurance (UI), Employment Training Tax (ETT), State Disability Insurance (SDI), and Personal Income Tax (PIT) withholding. For 2026, the headline figures are UI at 3.4% for new employers on the first $7,000 of wages, ETT at 0.1% on that same $7,000 base, and SDI at 1.3% with no wage limit. PIT withholding follows Franchise Tax Board tables and every return moves through electronic filing.
TL;DR:
- California's unemployment insurance rate starts at 3.4% for new employers on the first $7,000 of wages, with the rate fluctuating based on reserve account experience.
- The State Disability Insurance rate is 1.3% paid by employees on all wages without a yearly cap, requiring employers to update payroll systems to avoid underwithholding high earners.
- Personal income tax withholding depends on employee filings using either wage-bracket tables or percentage calculations, starting with the DE 4 form.
- Federal payroll taxes, such as Social Security and Medicare, run parallel but separately from state taxes, with specific wages caps and additional Medicare taxes applying.
- Regular review of DE 2088 notices, timely filings via e-Services, and accurate wage reporting are crucial to avoid costly UI rate increases and penalties.
Table of Contents
- Unemployment Insurance and Employment Training Tax Rates
- What Changed With SDI, and What It Means for Your Payroll
- How Do You Calculate California PIT Withholding?
- Do California and Federal Payroll Taxes Overlap?
- When Are DE 9 and DE 9C Due, and How Do You Register?
- How Is Your UI Rate Actually Determined?
- Your Compliance Checklist for 2026
- Why Small Errors in Payroll Compliance Cost More Than They Look
- Get a Free Payroll Audit Before Your Next Filing Deadline
- Where to Confirm Current Rates and Forms
- Sources
- FAQ
Unemployment Insurance and Employment Training Tax Rates
UI and ETT are both employer-paid taxes, and both apply only to the first $7,000 of wages per employee each calendar year, regardless of how much that employee actually earns over the year. New employers start at a 3.4% UI rate. After that, your rate moves within Schedule F+, which ranges from 1.5% to 6.2%, plus a potential emergency surcharge depending on the state's unemployment fund balance.
ETT sits at a flat 0.1% on the same $7,000 wage base, though employers with a negative reserve-account balance can be assigned a 0% ETT rate instead.
Here's how the math works for a single employee, based on the taxable wage base and rates:
- UI liability: 3.4% on the first $7,000 of wages
- ETT liability: 0.1% on that same $7,000 base
- The combined employer cost is fixed per employee up to that wage base, regardless of actual salary
Your specific UI and ETT rates arrive every December on the DE 2088 notice, which reflects your reserve-account experience rating. We'll cover how that number gets calculated later in this guide.
What Changed With SDI, and What It Means for Your Payroll
SDI is the one California payroll tax withheld from the employee's paycheck rather than paid by the employer, and it's the tax that caught the most employers off guard in recent years. The 2026 SDI rate is 1.3%, and critically, there is no taxable wage limit — a rule that has applied since January 1, 2024.
Before 2024, SDI stopped once an employee's wages crossed an annual cap. Now it applies to every dollar an employee earns, all year long. An employee earning $250,000 pays SDI on the full amount, not just the first slice of it.
Your responsibilities as the employer:
- Withhold 1.3% from every paycheck, with no cutoff point once an employee hits a wage threshold
- Remit withheld SDI along with your other state payroll tax deposits
- Confirm your payroll software or provider has updated its wage-base logic. Older systems built around the pre-2024 cap can silently underwithhold for higher earners.
If you run payroll manually or through a legacy system, this is worth checking directly against the current SDI wage-limit guidance rather than assuming last year's settings still apply.
How Do You Calculate California PIT Withholding?
Personal Income Tax withholding is where most calculation errors happen, mainly because employers try to eyeball it instead of using the correct method. California gives you two options:
- Wage-bracket method: Look up the employee's wages and filing status directly in the FTB withholding tables to find the withholding amount. This is faster for most small-business payroll runs.
- Percentage method: Apply a formula based on annualized wages, allowances, and filing status. This suits employers running payroll software that calculates withholding programmatically rather than manually.
Every employee's withholding starts with the state equivalent of a W-4: the DE 4 form. If an employee never submits one, you're required to withhold as if they claimed single with zero allowances, which is almost always the highest withholding rate available. That default protects the state, not the employee, so it's worth reminding new hires to file a DE 4 during onboarding rather than assuming the federal W-4 covers it.
For example, a monthly-paid employee earning $4,500 will see a different dollar withholding under the wage-bracket table versus the percentage method calculation, though both should land close to the same figure when applied correctly. Current tables live on the FTB withholding page, which updates annually.
Do California and Federal Payroll Taxes Overlap?
State and federal payroll taxes run on parallel tracks, and confusing the two is a common source of underpayment. For 2026, Social Security tax is 6.2% for both employer and employee, applied up to a $184,500 wage base. Medicare is 1.45% each side with no wage cap at all, and employees earning over $200,000 face an Additional Medicare Tax withholding on top of that.
Quick federal snapshot for 2026:
- Social Security: 6.2% employer + 6.2% employee, capped at $184,500 in wages
- Medicare: 1.45% employer + 1.45% employee, uncapped
- Additional Medicare Tax: extra withholding above $200,000 in wages, employee-paid only
- FUTA: 6.0% base rate, but employers who pay their state UI on time typically receive a credit of up to 5.4%, bringing net FUTA down to 0.6% in most cases
The filing rhythms differ too. Federal payroll tax gets reported on Form 941 quarterly, while California's equivalent runs through DE 9 and DE 9C on the state's own quarterly schedule. Deposit timing for each can fall on different days within the same month, so treat them as two separate calendars, not one.
When Are DE 9 and DE 9C Due, and How Do You Register?
Every business becomes an EDD employer the moment it pays more than $100 in wages during a calendar quarter. That threshold is easy to miss for a business that hires its first part-time employee expecting to "figure out payroll later." Register before that first paycheck, not after.
Once registered, quarterly filing follows a fixed schedule:
- Q1 (Jan–Mar): DE 9/DE 9C due April 1
- Q2 (Apr–Jun): due July 1
- Q3 (Jul–Sep): due October 1
- Q4 (Oct–Dec): due January 1
All returns and deposits must go through EDD's e-Services for Business portal; paper filing is no longer an option for standard employers. Missing electronic deadlines triggers noncompliance penalties even if the payment itself was on time by check.
Pro Tip: If you're behind on a deposit, log into e-Services and file immediately rather than waiting for the next quarter. Partial or late compliance almost always costs less in penalties than silence does.
For a closer look at how deposit timing actually plays out across a full year, Glendale Payroll's payroll tax deposit schedule guide breaks down the mechanics in more depth.
How Is Your UI Rate Actually Determined?
Your UI rate isn't arbitrary. It comes from an experience-rating system tied directly to your reserve account, and the DE 2088 notice arrives every December showing your assigned UI and ETT rates, your taxable wage limit, and a window to file a protest if something looks wrong.
That rate is driven by your reserve-account balance, which rises and falls based on benefit charges — the unemployment claims filed by former employees against your account. Accurate separation documentation and prompt wage reporting directly protect that balance.
The most common mistakes that push future UI rates higher:
- Misclassifying employees as independent contractors, which surfaces during an EDD audit and triggers back taxes plus penalties
- Filing wage reports late, which delays reserve-account accuracy
- Failing to keep final pay and separation records, weakening your position if a former employee's unemployment claim is contested
Small documentation gaps compound quietly. A business that lets separation records slide for two or three years can see meaningfully higher UI rates than a competitor with the same size payroll and cleaner records.
Your Compliance Checklist for 2026
Getting ahead of California payroll tax rules comes down to a short, repeatable list rather than a complicated system:
- Register with EDD as soon as wages exceed $100 in a quarter
- Collect a completed DE 4 from every new hire during onboarding
- Confirm your payroll system applies SDI without a wage cap
- Set calendar reminders for DE 9/DE 9C due dates each quarter
- Review your DE 2088 notice every December and protest promptly if the rate looks wrong
- Keep separation letters and final pay records for every departing employee
- Run an internal payroll audit at least once a year
A dedicated payroll professional catches misclassification and documentation gaps before they become UI rate increases or EDD penalties. That's the exact function of a payroll compliance review: finding the small errors that compound into expensive ones.
Pro Tip: Treat your annual DE 2088 review the same way you'd treat a tax return. A five-minute check against your own records now can save hours of dispute later.
Why Small Errors in Payroll Compliance Cost More Than They Look
Payroll tax accuracy isn't paperwork for its own sake. Every misclassified worker, late wage report, or missing DE 4 chips away at cash flow and quietly raises your UI rate exposure for years afterward. The employers who treat compliance as a once-a-year task are the same ones who get blindsided by a DE 2088 rate jump they can't explain.
Run through the checklist above this quarter. If it feels like more than your team can track confidently, a free payroll audit is a low-risk way to find out where the gaps actually are.
— Glendale Payroll Staff
Get a Free Payroll Audit Before Your Next Filing Deadline
Glendale Payroll is the alternative to guessing your way through UI rate changes and DE 9/DE 9C deadlines: dedicated payroll professionals handle your filings directly, instead of routing you through a call center that's never seen your reserve account.
Glendale Payroll's payroll processing and tax filing services cover EDD account setup, quarterly state filings, W-2 preparation, new-hire reporting, and direct deposit, all under one engagement built for Glendale, Burbank, Pasadena, and Greater Los Angeles employers. Every new client starts with a free comprehensive payroll audit that flags misclassification risk, DE 4 gaps, and SDI wage-base errors before they turn into EDD penalties.
Service runs $105 per month per company plus $12 per employee, with a one-time $100 setup fee for onboarding and EDD registration, detailed on the pricing page. If you're still weighing outsourced payroll against handling it in-house, this payroll outsourcing guide covers what to consider before deciding. When you're ready, schedule your free audit and get your next DE 9/DE 9C filing handled correctly the first time.
Where to Confirm Current Rates and Forms
Rates and wage bases change year to year, so verify figures directly with the source before filing:
- EDD rate tables and DE 2088 guidance for current UI, ETT, and SDI figures
- IRS Publication 15 for federal withholding and FICA rules
- EDD's e-Services portal for DE 9/DE 9C filing and payment
Check EDD and IRS pages each January and again in December, when the new DE 2088 notices go out.
This article is general information, not a substitute for advice from a qualified financial advisor. Consult a qualified financial professional about your own circumstances before acting on anything here.
Sources
- Tax Rates, Wage Limits, and Value of Meals and Lodging (EDD)
- Publication 15 (Circular E), Employer's Tax Guide (IRS)
FAQ
What Are the Taxes on Payroll in California?
California employers handle four payroll taxes: Unemployment Insurance (UI) and Employment Training Tax (ETT), both employer-paid on the first $7,000 of wages; State Disability Insurance (SDI), withheld from employees at 1.3% with no wage limit; and Personal Income Tax (PIT) withholding, based on FTB tables and the employee's DE 4.
How Do You Calculate Payroll Taxes in California?
Start by applying UI and ETT rates to the first $7,000 of each employee's annual wages, then withhold SDI at 1.3% from every dollar of gross pay with no cap. PIT withholding comes from the wage-bracket or percentage method using the employee's DE 4, and all figures get reported quarterly on DE 9 and DE 9C.
What Percentage of My Paycheck Goes to Taxes in California?
The exact PIT percentage varies by income and filing status under the FTB withholding tables.
What Are the Payroll Tax Rates for 2026?
Existing employers' UI rates vary between 1.5% and 6.2% under Schedule F+, depending on their reserve-account experience rating.
Can Glendale Payroll Help With California Payroll Tax Compliance?
Yes. Glendale Payroll provides payroll processing, state and federal tax filing, EDD account setup, and W-2 preparation, backed by a free comprehensive payroll audit to catch misclassification and withholding errors early. Pricing and service details are listed on the services page.